The Simple Path to Wealth (Book Breakdown)

I'm also going to buy you a book!

📚 Hey, here’s a simple (but long-term) strategy for building wealth:

It’s all laid out inside The Simple Path to Wealth, by JL Collins, and I’ve got a sample of my complete breakdown of the book for you here in this email.

But first, I’m going to buy you a book - every month.

What are you going to read first?

I’m serious! From now on, every new member of The Competitive Advantage will receive a new book of their choice, paid for by me, every month. Their choice of fiction or nonfiction - no restrictions!

If you’re interested, click here to find out more about it.

There are also plenty of other great members-only benefits all laid out on that page too.

I’ve also got a new YouTube video out now summarizing Nine-Figure Mindset, by Brandon Dawson, an entrepreneur who sold his company for $151,000,000 and then built ANOTHER one alongside Grant Cardone to a half-billion-dollar valuation.

The book’s great, and my video can help you decide whether or not to buy it:

And now, let’s talk about how you’re massively overcomplicating this whole wealth-building thing!

Today’s book will NOT help you build a 9-figure company (frankly, that’s a lot of work, it’s very uncertain, and most people honestly don’t even need that much money).

I’ve written a full breakdown of the book that you can read in just 42 minutes, and I’m going to share a sample of that breakdown here in this email.

The full breakdown is available right here for free, and then in a short time (not sure exactly when on this one) I’ll be putting it back behind the paywall.

Then it’ll be just for Premium subscribers of The Reading Life and members of The Competitive Advantage. 

And now let’s learn how to…

This Book is For:

*People who aren't necessarily interested in becoming financial experts, and who just want a simple, proven plan that will lead them to financial independence and freedom as long as they just follow the steps.

*Young people who are just beginning to make their way in the world, maybe even about to receive their first big paycheck, and who need to learn about all the financial traps waiting for them - and opportunities available to them - before it's too late.

*Older adults who are starting to experience the reality of nearing retirement age, and who want to further fortify themselves against financial uncertainty by the time they get there - and for the rest of their lives after that.

*Anyone and everyone who is looking for a simple, timeless, nearly effortless investing strategy that has been proven to work across time and for all kinds of different people in various stages of life and circumstances.


“Since money is the single most powerful tool we have for navigating this complex world we’ve created, understanding it is critical. If you choose to master it, money becomes a wonderful servant. If you don’t, it will surely master you.”

-JL Collins, The Simple Path to Wealth

There are approximately eight hundred gazillion books out there about investing, but this is one of the best ones.

It also comes with an extremely easy-to-follow formula for building wealth over time: Spend less than you earn. Invest the surplus. Avoid debt.

And that's pretty much it. 

The financial world is notoriously murky and opaque, and much of what goes on there appears to be random, but The Simple Path to Wealth cuts through all the noise and deception and gives you the straight facts.

It's also for people who don't want to invest a ton of time learning everything there is to know about money.

Everybody wants financial security and freedom, but most people don't have any interest in becoming financial experts. This book bridges that gap beautifully.

The Simple Path to Wealth goes a bit deeper into the author’s personal philosophy as well, which is fundamentally about freedom. It's about getting this "money" thing handled, and thus expanding the possibilities for your own life.

Speaking of freedom, it strikes me that many people believe that their personal freedom is much further away than it actually is.

JL Collins repeatedly dispels this myth on page after page, and by the end of it, you're left with this confidence, this inner knowing, that you can do this. You can earn your freedom. You can build wealth and reach financial independence, and it's not going to take you until the end of your days to do it.

Of course, freedom is far away if you choose to remain financially illiterate and don’t take time to learn how the stock market works, what the difference is between an index fund and a mutual fund, what an IRA is, and all this basic financial literacy stuff that he covers in this book.

But more than that, Collins gives you the confidence that you can figure this stuff out; you can make meaningful changes to your financial strategy that will significantly improve your situation; you can do it, and thinking about money doesn't have to take over your whole life.

This book is extremely practical, and you'll learn what, specifically, to invest in (and to avoid) that will give you the greatest chance of building significant wealth over time.

But the overall theme - the main takeaway - is that the stock market is the world's most powerful wealth-building tool, and, over a long-enough time horizon, it always goes up. Always.

The whole process of reaching financial independence involves five simple steps, which are as follows:

  1. Save Aggressively: This involves paying off most debt as soon as humanly possible, and, where it makes sense, aiming to save 50% or more of your pre-tax income. I know, I know, 50% is a lot. But we're going to discuss how 50% (or something close to it) is a lot more realistic than you might expect.

  2. Invest Strategically: You're going to have to decide for yourself how much risk you'd like to take on (which will determine your specific investment allocation, re: stocks vs. bonds, etc.), and then you're going to buy low-cost index funds such as Vanguard...and then hold them for decades.

    Do not pull your money out of the market when stocks start to tank, as they almost inevitably will at least some of the time that you're invested in the stock market. Trying to time the market and pulling out when things get rough (and before the market inevitably recovers) is how people go broke.

  3. Be Prepared: You're also going to want to keep some cash on hand for emergencies and to pay for various life events such as home renovations, car repairs, etc. Don't get caught off guard! When you prepare for them beforehand, big emergencies often turn into small inconveniences.

  4. Be Tax-Efficient: This is where the book is most valuable to U.S.-based readers and mind-numbingly boring to non-U.S. readers. But if you live in the United States, you're going to want to fill up all of your tax-advantaged accounts first, and this section will show you exactly how to do that. In the View from the Opposition section below, I link to similar resources for international readers.

  5. Don't Stop: That is until you can afford to live off 4% of your investment portfolio each year. It may take a while, but your wealth accumulation will speed up over time, especially if you're reinvesting the dividends from your investments along the way.

There are plenty of other topics discussed in the book, such as where traditional investing advice goes wrong and what actually works; the inner workings of the stock market and how to avoid being taken for a ride; how to change your investment strategy depending on which season of life you're currently in, how the market is faring, etc.; how fund managers are costing you literally thousands of dollars in extra fees; what financial independence actually looks like, and how to protect it, and so much more.

Most importantly, there's nothing in this book that's beyond your comprehension. You can learn everything you need to know to set yourself up for freedom and independence for life, and it doesn't have to consume your life.

You can spend just a few hours learning the basics of investing, money management, and finance, and then you can begin to apply them immediately to make your entire life better from this day forward. Very few investing books come with that kind of ROI.

Key Ideas:

#1: Yes, it Really is That Simple

“Spend less than you earn—invest the surplus—avoid debt.”

It would be wrong to mistake "simple" for "easy," but Collins' recommended plan definitely works. It's extremely simple - almost too simple for some people's tastes - but I find that when you overcomplicate money and investing, that's where mistakes really start to creep in.

People try to get fancy (or lazy) and end up with a whole lot less money than they could have had if only they had followed the simple plan!

But investing and saving for your future does not have to be complicated, and all it really comes down to is:

  1. Spend less than you earn.

  2. Invest the surplus.

  3. Avoid debt.

That's really it. People make money and investing so complicated (including certain financial predators we'll discuss later), and the rest of society often doesn't make it any simpler for them.

First, there is the tremendous social pressure exerted on you to keep up with the vacations and purchases of everyone else, even when you can't really afford them.

There are literally thousands and thousands of advertisements assaulting your eyes and ears every single day, all trying to convince you of the same idea: that you need this next, shiny, perfect thing before you'll ever feel complete. But that's a complicated lie.

I've said over and over again that I'm not "against" spending money on products and experiences that will make your life better. It's just that we tend to overvalue the positive contribution that these purchases will make to our quality of life.

Lazy thinking leads us to believe that if we just hand over our credit card this one more time that we'll be happy and complete forever, but again, that's just not true.

When you start to spend less than you earn, you'll begin to realize how possible financial independence actually is for you. JL Collins even advocates maintaining a 50% savings rate, which seems impossible, but when you begin to simplify your financial life, the path to get there begins to take shape.

Cutting your expenses is one path to increasing your available savings rate, but reducing your desires will also increase your happiness, making it even easier to live with fewer possessions and hence, fewer unnecessary bills.

Wanting less will make it easier to live with less, to the point where you won't even notice it. You'll be just as happy as before, with the only difference being that you'll have a higher savings rate.

No one is talking about deprivation here. I'm not advocating making yourself miserable now, just so that you can save and invest for 50+ years and be happier at some distant point in time that may never arrive for you.

Wheelchairs don't fit inside the trunks of Lamborghinis, and sacrificing the healthiest years of your life for some future that may never come just doesn't make sense.

What I am saying is that you don't need all that "stuff." You are a capable, resourceful, life-loving adult who is perfectly able to live a wonderful, joyous life without saddling yourself with worthless, meaningless, debilitating debt.

#2: Debt Has No Place in Your Financial Life

“If you intend to achieve financial freedom, you are going to have to think differently. It starts by recognizing that debt should not be considered normal. It should be recognized as the vicious, pernicious destroyer of wealth-building potential it truly is. It has no place in your financial life.”

What if I told you that there’s somewhere you can legally put your money that will guarantee you a 16.22% (or more) rate of return?

Well, as Homer Simpson said to the security system salesman who asked him whether he could really put a price on his children’s lives, "I wouldn’t have thought so either, but here we are."

Jokes aside, all I'm really talking about here is a mental reframe you can make — and the accompanying actions you can take once you see things this way — that will put thousands of dollars right back into your pocket.

I’m talking about paying down your credit cards. ASAP. It’s not exactly what I would call “exciting,” but it’s 100% effective at saving you money.

According to Wealthsimple, the average annual return of the S&P 500 for the years 1957–2018 was about 7.96%. This is great, meaning that no matter what the market did in, say, 2008, you still would have made money.

But when you’re paying 16.22% interest on your credit cards (which is the average in the U.S.), it’s exactly like taking a 16.22% negative return on your money. Every year! Every. Single. Year.

Clearly, when you're stuck in a cycle of paying hundreds - if not thousands - of dollars every single month to pay down credit card debt, it makes wealth-building a whole lot more difficult. And that's not counting any other forms of debilitating debts such as student loans, which can literally follow you for life.

Debt is your worst enemy when it comes to building wealth for a lifetime, and according to JL Collins (and me too, actually), you have to do everything you can in your power to pay off your debts as fast as you can so that you can get on with the real business of living.

If you stick to the plan, however, your debt won't last forever. 

Eventually, you'll pay it all off. You will. I believe you will.

And at the end of it, that $500 a month you used to be spending on debt payments will be earning money in the stock market, rather than just flying straight into the vault of some bank. Then, the real financial fun begins for you.

#3: Investing is a Mind Game

“The market always recovers. Always. And, if someday it really doesn’t, no investment will be safe and none of this financial stuff will matter anyway.”

In The Psychology of Money, Morgan Housel says that doing well with money has a little to do with how smart you are and a lot to do with how you behave. It's not so much that we don't know what to do, it's about what happens in our head when we try to do it.

We all know what we need to do. This really is the blatantly obvious, stupidly simple guide to wealth we're talking about here. No one's reading Collins' book going, "Ohhhh, spend less than I earn! I never thought of that!" 

So we know what to do. But now we have to actually do it, and that's where most people stumble, even many very smart people.

To date, there's never been a 20-year period where the total U.S. stock market has lost money. Again, from The Psychology of Money:

“The historical odds of making money in U.S. markets are 50/50 over one-day periods, 68% in one-year periods, 88% in 10-year periods, and (so far) 100% in 20-year periods. Anything that keeps you in the game has a quantifiable advantage."

And yet multitudes of people go broke each and every year trying to pick winning stocks. Why is that?

Well, the answer is right there in the question, because trying to time the market is one of the most difficult things you could ever do.

It's so difficult that virtually 0% of people are actually able to do it, and the ones who say they can are what Collins and I call f***ing liars.

Investing is primarily a mind game - it's perhaps one of the grandest experiments in human psychology ever conducted.

The mental game is the one you have to win first, and the simple path to wealth only works if you avoid some of the major pitfalls that we've already discussed, such as racking up credit card debt, jumping in and out of the market, etc.

What Collins suggests is to disregard psychological comfort when setting your personal investment strategy. It's better, as he says, to adapt yourself and your attitudes to the numbers than to adapt the strategies you employ to your psychological comfort levels.

Adopting the best strategy - buying index funds and holding them for 50+ years - isn't the most comfortable strategy; the stock market is a wild ride, and some years you'll be tempted to jump out in fear of losing everything.

But historically, the market always recovers, and you'll just make yourself sick if you check your portfolio 175 times a day, keeping track of all the ups and downs.

Sure, you can check your portfolio every few months maybe? Every two or three weeks if you're feeling brave. The occasional glance at the stock market news won't hurt too much.

But just remember that the media companies attract eyeballs by telling people that the stocks are either going to the moon or that we're all f***ed and are going to be living on the street if we don't sell NOW.

If they say anything measured or nuanced or the least bit rational, their ratings will tank and they'll lose money. Remember this the next time you watch the news. Then, happily go about your day.

Book Notes:

“Personally, there is nothing I’d rather buy or own than F-You Money. With it, the world’s possibilities are endless and you are faced with the delicious decision as to what to do with your freedom. The only limits are your imagination and your fears.”

“Once 4% of your assets can cover your expenses, consider yourself financially independent. Put another way, financial independence = 25x your annual expenses.

That is, if you are living on $20,000, you have reached financial independence with $500,000 invested. If, like our friend Mike Tyson, you are living on $400,000 a month/$4.8 million a year, you’re going to need $120 million.”

“At 8%, $20,000 earns $1,600 per year. So your $20,000 car actually costs you $21,600. The original $20,000 plus the $1,600 it could have earned. But that’s just in the first year, and you are suffering this opportunity cost every year.

Over the 10 years you might own the car, that’s 10 x $1,600: $16,000. Now your $20,000 car is up to $36,000. That’s really understating things, however. We haven’t even considered what those annual $1,600 chunks could have been earning themselves. And what those earnings could then have been earning. And so on.

Should you not already be depressed enough about all this, remember that the $20,000 is gone forever and so is the $1,600 in lost earnings year after year with no end. At the end of the day, it’s one expensive damn car.”

“Stop thinking about what your money can buy. Start thinking about what your money can earn. And then think about what the money it earns can earn.”

“It’s a big beautiful world out there. Money is a small part of it. But F-You Money buys you the freedom, resources, and time to explore it on your own terms. Retired or not. Enjoy your journey.”

Action Steps:

So you've finished reading. What do you do now?

Reading for pleasure is great, and I wholeheartedly support it.

However, I am intensely practical when I'm reading for a particular purpose. I want a result. I want to take what I've learned and apply it to my one and only life to make it better!

Because that's really what the Great Books all say. They all say: "You must change your life!" 

So here, below, are some suggestions for how you can apply the wisdom found in this breakdown to improve your actual life.

Please commit to taking massive action on this immediately! 

Acting on what you've learned here today will also help you solidify it in your long-term memory. So there's a double benefit! Let's begin...

#1: Before You Do Anything...

In her excellent time-management book, 168 Hours, Laura Vanderkam writes that the best way to gain control over our time is to figure out how we're spending it now. We can take a similar approach to our finances!

So before we do anything else, it's a good idea to figure out where we are now with our finances - what our situation is, and what our options are.

This means making some sort of budget, taking into account your lifestyle, cost of living, any assets or liabilities you have...that sort of thing.

Then, it may be a good idea for you to calculate how much you'd need to have invested to be able to maintain your ideal lifestyle by withdrawing 4% per year from your investments.

As discussed elsewhere in this breakdown, if you want to live on $100,000 per year, that means having $2,500,000 invested in the stock market and living off the interest.

#2: Destroy Debilitating Debt

Debt has no place in your financial life! JL Collins says that repeatedly, I say it yea!

Sometimes it's more or less unavoidable, or at least understandable, as in the case of taking on student loans or buying a car, but it's that mindless consumer spending that leads a lot of people into debt trouble, and that's the kind that needs to be ruthlessly eliminated from your life if you want to give yourself the best odds of becoming financially free.

There are two popular methods for eliminating debt, and the first is to address the loan with the highest interest rate and pay that off first. Mathematically, that's the best option, because you're paying down the principal and reducing your interest payments along the way.

However, other people have success with something called the snowball method, where you take the smallest debt balance and pay that off first. The thinking behind this is that if you have multiple smaller loans all competing for your attention, it makes it difficult to get a handle on everything psychologically.

If you take out those smaller balances first, putting every single dollar you have into paying off that smallest amount, you'll build up momentum, and you'll be able to move on to the next highest balance, and so on until you're completely debt free.

The choice is up to you, but the important thing is that you get this situation handled once and for all.

#3: Make Your First Deposit

Getting in the habit of investing is so incredibly important. That's why this Action Step is simply to open an investment account and deposit your first $10.

Earning 8% interest on $10 is almost literally nothing, but it's NOT nothing, because you're getting started. You're moving down the path, and that's something to be celebrated.

Depositing just $10 a month is $120 in 1 year (if my math serves me correctly!), but as you keep eliminating your debt and working to make more money, the amount you'll be able to deposit will keep rising as well, until you're able to start getting into triple digits and even higher!

The important thing is that you just don't stop. You can even set it up so that a certain amount is invested automatically each month so that you don't even have to think about it!

Eventually, you'll look back and realize that you are an investor. You've armed yourself with the requisite knowledge, and taken the appropriate steps, and you're now destined for financial independence.

"The path to success is to take massive, determined action."

-Tony Robbins

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OK, that’s it for now…

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With that said, I hope you enjoyed this edition of The Reading Life, and enjoy the rest of your week!

Until next time…happy reading!

All the best,

Matt Karamazov

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